Case Study One

Abstract

The prominence of the Marshall Islands hearkened globally to 2018, with their Sovereign Currency Act 2018 enacting a national digital currency to reduce their dependence on the US dollar. There was an initial obstruction in the Marshall Islands parliament due to opposition from the International Monetary Fund (IMF) that the currency does not meet the definition of a central bank digital currency. Despite the objections of the IMF, the US Treasury Department and banks, the Marshallese government adopted their own digital currency. The Sovereign Currency Act (2018) states that digital decentralized currency (‘cryptocurrency’) should be used as a legal tender for the Republic of the Marshall Islands. It utilizes Algorand’s source blockchain technology for the digital currency ledger. This chapter presents a case of the Marshall Islands sovereign currency to help us understand digital currency usage and its obstacles. First, we consider the background of the Marshall Islands’ economic situation. Second, we consider demographics, trading volume and value compared to the rest of the world. We also discuss purchasing power, GDP, industry, regulations and infrastructure. Sovereign currency facilitates international commerce, although the poor infrastructure, legal framework and security remain challenges for fully implementing digital currency in the Marshall Islands and beyond.